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* I gave subscribers details about this pension reform impasse yesterday…
The pension proposal’s fate is uncertain should it pass the House. The Senate went home Thursday but Cullerton left open the possibility of coming back. Cullerton spokeswoman Rikeesha Phelon said senators would return to Springfield Tuesday “to review and hear” a significant pension reform bill if one is passed by the House.
“I can’t make any predictions beyond that,” she said.
When the governor and legislative leaders met Saturday, Cullerton said at various points he would lobby against the House plan, Cross said. But Cross also said Cullerton indicated that he would allow for a Senate vote if the pension measure passed the House.
Still, if Cullerton balks at the House pension plan, Springfield could devolve into an all-too-familiar political game: The House passes one version of legislation, the Senate passes another, lawmakers pat themselves on the back and then blame the other chamber for failing to achieve needed reform.
* Yep. Not looking good right now, campers…
Madigan also said he has not decided whether a vote will occur on the Cullerton-backed plan in the Senate, as Cullerton has insisted.
“Well, I don’t know about that, but I know that John has given a lot of time and effort and study to the pension question, and so he’s got some strong views on it, which he’s entitled to,” Madigan said. “I don’t think we should get hung up on details. I think we ought to be focused on getting something done.”
Pressed on what’s left to be done, Madigan said, “Well, to sit down and reconcile differences and do a little give and take and move a bill.”
A Cullerton spokeswoman late Sunday held to her boss’ earlier position that the House first take up the pension legislation that passed the Senate last May before anything else.
“He’s still insisting they take up HB1447. We need an opportunity to have an up-or-down vote,” Cullerton spokeswoman Rikeesha Phelon said.
“It’s already passed one chamber, and it has a constitutional framework we feel will hold up in court. We believe those considerations are very important on any bill that’s passed,” she said.
* And…
Senate President John Cullerton wants the House to approve cuts for state workers and lawmakers, leaving teachers alone for now.
With Republicans possibly getting on board a more sweeping plan, such a move might be getting more unlikely.
“They don’t want to see the Senate bill done just because it’s halfway there,” state Rep. Darlene Senger, a Naperville Republican, said.
There’s more. Much more. But you gotta subscribe.
Discuss.
posted by Rich Miller
Monday, Jan 7, 13 @ 9:02 am
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Next fisc year under the current protocol, the state will have to put nearly $7 billion into the pension fund. But that amount could be reduced by a couple of billion if a substantive pension bill passes. And even if they have to put it back later, they can blame it on the courts.
I suppose that extra $2 billion looks pretty good to the Democratic pols who run this one-party state. Maybe good enough to cancel out fears of union retaliation, should it happen. Sure, some of the $2 billion may go to pay back bills. But there’s also patronage, nepotism, lucrative grants and contracts for relatives and pals, the usual largesse our pols dole out to themselves.
Meanwhile,I hope state retirees get out their calculators and figure out how much the cola changes are really going to cost them because, as proposed, it’s a lot, even though the initial cost will seem small. And we don’t even know how much future inflation will be as the econnomy recovers. Something to think about as they watch the pols playing in the rain of “pension savings” money.
Comment by cassandra Monday, Jan 7, 13 @ 9:17 am
While the democrats in the Senate and the House twiddle their thumbs, each day brings a worsening financial condition and morefunds used to pay interest paid on bonds, which could go to pay down the debt.
Comment by Downstater Monday, Jan 7, 13 @ 9:19 am
I really need to suscribe …but if they were ever serious Id take Chained CPI It will solve teh short term problem BUT if there is hyperinflation it would beat 3%
Comment by western illinois Monday, Jan 7, 13 @ 9:24 am
Madigan is a detail person. I know I’m taking the quote out of context, but when Madigan quits worrying about the details of anything, you just know nothing much is going to happen … or was that just frustration coming out?
Comment by RNUG Monday, Jan 7, 13 @ 9:38 am
MM: “Yeah, Johnny, I know you got your license, but it’s my car and I’m going to drive.”
Comment by wordslinger Monday, Jan 7, 13 @ 9:45 am
Madigan is not ‘frustrated’, he’s ‘in charge’; never doubt that.
Every legislator took an oath to uphold the Illinois Constitution. Voting for an obviously unconstitutional pension bill is the cowardly thing to do. The current legislators are always looking how to blame someone else for the huge problem they alone created while doing whatever they can in the short-term to lower bond interest rates.
Anyone, Democrat or Republican, who votes for ANY bill that is blatantly unconstitutional is a coward.
Comment by Jechislo Monday, Jan 7, 13 @ 9:46 am
-I don’t think we should get hung up on the details-
That’s what is scary about the lame duck session-lack of details. I heard Rep Nekritz on a talk show and she made it sound like an ‘actuarially required contribution’ was a new concept developed by the general assembly. The actuarially required contribution was been ignored by the GA for 30 years-thus the problem.
Comment by Soccertease Monday, Jan 7, 13 @ 9:54 am
==Anyone, Democrat or Republican, who votes for ANY bill that is blatantly unconstitutional is a coward==
Yep
Comment by dupage dan Monday, Jan 7, 13 @ 10:04 am
Can we just say that anything they attempt to pass will be locked up in court by lawsuits from all the unions representing the workers of this state? I mean how can you ram through legislation to fix something that has been screwed up for years? Nobody trusts Madigan or state government anymore since they are always ranked at the bottom of fiscal management. I think the last ranking I saw showed them 50 out of 51. Got alot of faith with those numbers.
Comment by Rocketman Monday, Jan 7, 13 @ 10:05 am
Oops, sorry…..a bit quick on the Send button, sorry. Message is, taxpayers (of which public employees are members) should be outraged that more of our precious tax money will be going into court battles. But apparently, many are willing to toss the dice and spend it that way with a seemingly predictable outcome. Doesn’t make sense to me?
Comment by geronimo Monday, Jan 7, 13 @ 10:13 am
Is it plausible that the ratings agencies will lower the State’s rating if an unconstitutional pension bill becomes law?
In the eyes of the credit agencies, would not the two essential elements to an effective solution be reducing the State’s pension costs constitutionally and assuring sufficient revenue for a long-term payment plan? As described in the media, the current plan does neither. Further it would delay taking these essential measures and it would encourage irresponsible spending that would further erode the State’s financial position after the courts throw out legislation that impairs or diminishes pensions.
Abandoning an opportunity to couple constitutional changes with unconstitutional throw-away elements makes no sense to me.
Why bother with unconstitutional changes, especially given that there will be permanent enmity from members of the retirement systems?
Comment by east central Monday, Jan 7, 13 @ 10:42 am
Let me throw my two cents in again on this issue. Setting aside all employees past the eight year vestiture AND including teachers into this mix creates a pool of persons left over (who are not vested) which could be subject to changes the legislature is considering, and I think could be constitutional. But since they continue to go down a road paved with lawsuits, I guess they’d rather be subjective than substantive.
Comment by Captain Illini Monday, Jan 7, 13 @ 10:51 am
It’s sickening to hear legislators say there are different legal interpretations of “diminishing” a pension benefit. There is a universal understanding that “diminish” means to “make or become less” !!! Wake up politicians !!!
Comment by Meaningless Monday, Jan 7, 13 @ 11:04 am
“Is it plausible that the ratings agencies will lower the State’s rating if an unconstitutional pension bill becomes law?”
I’ve not read or heard of any concern upon their part about the constitutionality of proposals. The rush to pass anything is in large part a response to pressure from the ratings agencies to get SOMETHING done. While passing something may forestall a drastic rating reduction now, we’ll be back to square one when the courts throw out the “something.” But, we’ll have had a year or two respite from rating reductions.
Comment by Norseman Monday, Jan 7, 13 @ 11:32 am
Captain Illini
Let me throw my two cents in again on this issue. Setting aside all employees past the eight year vestiture AND including teachers into this mix creates a pool of persons left over (who are not vested) which could be subject to changes the legislature is considering, and I think could be constitutional.
No. Vestiture is not a consideration and the Illinois Courts have already dealt with this question. Essentially they have ruled that an employee has rights when they take the job, even for benefits that will not be vested for many years. As for what diminish meant they have ruled on this as well and have been very consistent. Any legislator who says otherwise is either ignorant or duplicitous (although I suppose they could be both). As I read this proposal legally, and this is what I do, I cannot imagine that it will pass constitutional muster. I would love to represent the litigants on this one as it stands now! Get out your checkbook Illinois!
Comment by Old and In The Way Monday, Jan 7, 13 @ 11:33 am
To repeat: this is not reform, it is reduction. Calling it “Pension Reform” is disingenuous. Please stop using that term and call it what it is. Thank you.
Comment by Flan Monday, Jan 7, 13 @ 11:45 am
Norseman - (back to square one) This does not take into account the backpay with intrest the State will owe all retirees. The sad part is the pols do not care to spend taxpayer money to play this game. The pols loose nothing and it cost them nothing. The attorney fees they pay to fight this in court and the back pay money is all taxpaer money. Sad
Comment by Sgtstu Monday, Jan 7, 13 @ 12:00 pm
From a quick scan of amendment 10:
SB1673-A010 major points
Starting in FY2020, fixed $1B to Pension Stabalization Fund; it does not reduce any other required payments
——————————
Tier 1 retiree before 1/1/2011
benefit base on either last years salary before enactment of this bill or SS cap level
Cola limited to lesser of $600 (coordinated) / $750 (uncoordinated) annually or 3% compounded
No COLA at all from effective date until 1/1/2020
Must be age 67 for COLA to restart and explicitily excludes the age increase granted as part of the 2002 ERI … this is huge kick in the pants to all the 2002 ERI retirees because the youngest were age 50 and that means no COLA for up to 17 years!
Changes aren’t retroactive and don’t remove previous COLA increases
———————————
Tier 1 employees
Tier 1 additional 1% contribution 7/1/2013
Tier 1 additional 2% contribution 7/1/2014 (up 1% plus previous 1%)
same benefit base cap as Tier 1 retiree above
a laundry list of school associations, etc. that service at (or leave for service) no longer qualifies as State service for pension purposes; grandfathers existing members
——————————-
can no longer purchase service credit for unused sick days for new hires after effective date
—————————
For 2014 - 2043 the State will contribute both normal and catchup payments sufficient to 100% fund by 2043 … this resets the “ramp”
Funding “contractually guarenteed” at the above level and the Systems can sue if the payments are not made … but even if judgement is granted, there is a loophole: “In ordering the State to make the required payment, the court may order a reasonable payment schedule to enable the State to make the required payment without significantly imperiling the public health, safety, or welfare.”
—————————-
If they pass it, let the lawsuits begin …
Comment by RNUG Monday, Jan 7, 13 @ 12:00 pm
Flan - Monday, Jan 7, 13 @ 11:45 am:
==”To repeat: this is not reform, it is reduction. Calling it “Pension Reform” is disingenuous. Please stop using that term and call it what it is. Thank you.==”
Flan,you are absolutely correct and I agree 100%. Unfortunately however, we lost the battle where facts and honesty long ago. If we were honest and used fact-based analysis, we would have simply repaid what was borrowed. Instead we lie by calling it “reform” and seek out convoluted tricks and schemes to evade our debt obligation.
We have sold our souls to avoid taxing rich folks’ services (like we tax poor folks’ goods).
Comment by Crime Fighter Monday, Jan 7, 13 @ 12:06 pm
Old and In the Way: Thanks for your position, as I was unsure about non-vested employees. I guess the only thing they can do is stick with new hires or going forward, then change the ramp law to lessen the payment schedule then stick to actually paying what is needed.
Comment by Captain Illini Monday, Jan 7, 13 @ 12:06 pm
re my earlier post @ 12:00 on 2002 ERI and COLA … should have read 7 years, not 17 since the 50 year old in 2002 would be 60 today
Comment by RNUG Monday, Jan 7, 13 @ 12:33 pm
Guess I think I’m still 50 … LOL
Comment by RNUG Monday, Jan 7, 13 @ 12:34 pm
RNUG, you may have been who mentioned SSA leveling (a fairly common practice - I guess), but it never seems to get any traction. I looked into it briefly, and what a sweet deal it is for the State pension systems. For those years up until you turn 62 or 66, the State will “advance” you about 40 cents on the SSA calculated dollar, and they deduct 100% of that calculated amount for the rest of your life - an ROI around 250-450% depending. If the State wants to change the rules after-the-fact, I feel retirees should have the option to opt-out at some point after the State has recouped its investment. This might take some the late-in-life pressure off the pensioners, but I don’t know how many of the total active population elected to take leveling. I’d love to know what the State’s total investment is in leveling, and how much they’ve recouped to date/over the pensioner’s life. It seemed to some (I don’t know) that leveling was promoted to the ERI crowd, and it would be interesting to it if the ratio of leveling to non-leveling in the ERI demographic is disproportionate to the total population. Do you think it would be interesting to know this information?
Comment by Anonymous Monday, Jan 7, 13 @ 1:40 pm
Would state retirees lose this year’s compounded cola, I wonder, should pension reform pass w/cola reduction. Or would the change start in 2014 (I’m assuming these are calendar year increases). By delaying, our Democratic pols who run the state might delay recipient outrage but making the change right before the primary might not be good for the guv. in his re-election campaign. And could a court challenge be resolved in a year. And how sure are we of the Supremes? Lots of uncertainties here.
Comment by cassandra Monday, Jan 7, 13 @ 1:52 pm
cassandra,
Everything says “as of effective date” or some later date (mostly for non-COLA items) … so I don’t see how it could be retroactive on the 2013 COLA which took “effect” 1/1/2013.
Comment by RNUG Monday, Jan 7, 13 @ 2:49 pm
cassandra,
First off, not a lawyer. From reading the Madiar analysis, I think the closest on point cases are IL Buddell v. Bd. of Trustees for SURS (1987), IL Kraus v. Bd. of Trustees of the Police Pension Fund of Niles (1971) and NY Lomax v Matthews (1951) (this specifically dealt with a COLA issue).
They are clear the already earned benefits can’t be diminshed, even if you have not yet retired. I won’t say it is a slam-dunk, but I think any retiree suit has pretty good odds.
Comment by RNUG Monday, Jan 7, 13 @ 3:13 pm
Well, with a combination of delayed implementation dates and an expedited court appeal (couldn’t the Supremes take the appeal directly from the trial court), the issue could be decided before any retirement plan participants suffered harm.
But the legislators could still assume it’s a valid law and not contribute as much to the pension system next fiscal year.
Happy spending days could be here again.
Comment by cassandra Monday, Jan 7, 13 @ 3:22 pm
RNUG,
You might want to quit referring to Madair as some sort of expert. He’s the guy who came up with the whole choice-consideration concept and declared it constitutional.He’s a hired gun. Like most lawyers he’ll say whatever he’s paid to say.
Comment by Bill Monday, Jan 7, 13 @ 4:13 pm
==I don’t think we should get hung up on details. I think we ought to be focused on getting something done.==
So they need to pass it before they can know what’s in it? Sounds like the Speaker has taken a cue from the Obamacare debate.
Comment by Fan of the Game Monday, Jan 7, 13 @ 4:19 pm
Bill
Madiar is indeed a hired gun, all of us lawyers are, but he is also very well known and respected in he field of pension law. I’m sitting in my office reading two of his most recent articles in law journals. There are many who agree with his analysis and very few who do not. Austin Sidley LLC and the Chicago Commercial Club among them. His study, referenced here, was actually done for Cullerton to try and find a constitutional way to “fix the pension mess.”
This is simple contract law here and not that esoteric. You don’t unilaterally change contracts just because you forgot to pay up! Ask your banker about that tactic……
Comment by Old and In The Way Monday, Jan 7, 13 @ 4:53 pm
The bill’s sponsor, state Rep. Elaine Nekritz, D-Northbrook, said she thinks the proposal would be found acceptable by the state’s highest court because the state is in a financial crisis.
sorry but thats not the way the constitution works.
Comment by foster brooks Monday, Jan 7, 13 @ 8:25 pm
How does she define a crisis? A mythical budget from 2040! If i went into court to discuss unicorns they would put me in a padded cell
Comment by western illinois Monday, Jan 7, 13 @ 9:05 pm
When researching all this across the various states, the same patterns seem to show up in both the underfunding and in the approaches taken by the various states to evade repayment or otherwise resolve it. Seems the different GAs are just copying each other and throwing up everything to see what will stick in that state.
Ignoring the few states that have actual “diminishment” clauses in their constitution, the bright line on success or failure in reducing the benefits seems to be whether or not there is a an express written intent to create a contract. If there is written evidence of a pension contract, the state almost always loses any attempt at reduction.
Comment by RNUG Monday, Jan 7, 13 @ 9:51 pm
Foster Brooks
“The bill’s sponsor, state Rep. Elaine Nekritz, D-Northbrook, said she thinks the proposal would be found acceptable by the state’s highest court because the state is in a financial crisis.”
Let’s see….first we steal the money and then we cite the lack of money as the crisis……..yeah that could work……but only if the justices are as simple and stupid as the legislators who are proposing this.
Comment by Dazed & Confused Monday, Jan 7, 13 @ 10:18 pm
RNUG again you have it right! That word appears in the constitution. Someone on the IEA site said the limitations on CO pension COLA were overturned on appeal so even there pension upheld
CA treas said on CNBC some years ago that state bankruptcy wouldnt help because the only real contracts are with the pensioners and the bondholders BTW why dont the bondholders have to share sacrifice ?
Comment by western illinois Monday, Jan 7, 13 @ 10:19 pm
Did anyone else notice the severability provision limitation (section 97)?
” … However, the changes made by this Act in an Article of the Illinois Pension Code that relate to (i) automatic annual increases, (ii) employee or member contributions, (iii) State or employer contributions, (iv) State funding guarantees, or (v) salary, earnings, or compensation are mutually dependent and inseverable. …”
It’s like they are daring the courts to find it unconstitutional.
Comment by RNUG Monday, Jan 7, 13 @ 10:31 pm
RNUG-You got it! And what does the infamous pension clause lay out in the clearest of language? That this is a contractual relationship, governed by contract law, which has Federal implications and that the intent is to prohibit the legislature from impairing or diminishing the contract. Pretty clear.
As for fiscal justification to invalidate, diminish or alter a contract there is precedent for this but I’m afraid the state would not like it. it’s called bankruptcy. Nor is the Illinois Supreme Court likely to set a new precedent given the implications for every other contract and litigation. How would state bond holders feel about that precedent? Bond ratings?
Surely there is more gong on here. Where’s Madigan and Cullerton on this!
Comment by Old and In the Way Monday, Jan 7, 13 @ 10:37 pm
western,
My take is that is why the bond raters were pushing pension reform so hard. Uniquely in IL, they know IL bonds are in line behind the pensions. This boils down to the fact there is a permanent continuing appropriation that pays / is supposed to pay the pension funds every month (unless the GA amends or suspends it for a given period). It other words, the pension fund payments are already authorized to be made for, well, forever. Been routinely ignored or bypassed by legislation a lot of years, but it exists.
Taking a haircut is what the bondholders are trying to avoid by sticking the cuts to the pensioners first, which will reduce the “required” contribution each month, making more money available for other payments such as bonds.
But more to the point of the CA Treasurer’s statement, since I don’t have the exact quote, I’m guessing they were pointing out pensions are a contract (for deferred compensation) and bonds are a contract (a loan requiring repayment). Straight contract law requires them to be honored. Almost everything else a state does is by various other means, usually enabled by statutes, and these obligations are generally not “contractual” (expressly written contract) in nature, so their “enforcement” relies only on state law whereas most states either acknowledge federal contract law or actually incorporate contract law.
Hope this reads clearer to you than it seems to me when I just re-read it; maybe I’m too tired to think straight.
Comment by RNUG Monday, Jan 7, 13 @ 11:05 pm
Old and In the Way,
Don’t know if you have done so, but if you go back and read the 1970 Con-Con verbatim transcripts (they’re online) on the pension clause and the testimony of the Con-Con pension clause sponsor in the IFT case, it is crystal clear the intent was to prevent exactly what the GA is trying to do right now.
Madigan should know this; he was one of the Con-Con delegates!
Comment by RNUG Monday, Jan 7, 13 @ 11:29 pm
I have not only read many of the transcripts but I was able to attend the convention sporadically as a volunteer. It’s a long story and a long time ago.
Green and others comments on this did not resonate with me until many years later. Frankly I don’t recall much of what transpired. There were so many other issues and debates it was overwhelming. The ramp agreement was my epiphany many years later.
I feel like I have come full circle from idealistic young man to cynical semi-retired geezer! Having been around the block with these clowns for so many years I am suspicious. There is more going on here than ineptness I suspect.” We aren’t that smart and they aren’t that dumb” (I heard Paul Powell say this once about an opponent.)
Comment by Old and In the Way Tuesday, Jan 8, 13 @ 12:46 am
Lots of people write and talk as if the constitutionality of a pension bill is easy to determine; it’s not. Reading the ConCon debate in light of the present situation is not edifying, that debate was a mess. For all the bluster, some of the legal principles being thrown around now have never been embodied in a statute that ever led to a court case being decided. People throw around out-of-context quotes from ConCon or cases, but none of it is as clear as they say it is, when you actually read the whole thing.
Madiar wants to amputate your hand OR your foot, but since you get to choose which, that somehow makes it constitutional. He’ll be back next year for the another appendage, with a similar deal, and every couple of years thereafter until nothing is left, at all. That is, if he can figure how to tell 850,000+ members of State pension plans exactly all the consequences of their choices and then to select their poison, in a system designed to handle maybe 20,000 retirements per year. And he’s the guy who claims to support the pension clause?
No, RNUG, I’ve read the transcript and almost NOTHING is crystal clear–in various statements the supporters say the purpose is (a) only to prevent total abolition of a pension, (b) to prevent a cut like going from 2/3 of pay after 20 years to 1/3 of pay after 30 years, (c) to protecting every dollar of accrued benefit, (d) to protect every dolar that could be earned under the rules when you’re hired, or (e) to provide a “dignified” retirement… sometimes, more than one of those in the same sentence. Read it without pre-conceptions and it borders on incoherent.
Comment by Harry Tuesday, Jan 8, 13 @ 5:26 am
Oh, and did I forget to mention that those 850,000 plan members whom Madiar would force to make life-altering decisions, include many retirees and survivors in their 70s, 80s and 90s, thousands of whom are no doubt suffering some degree of age-related dementia?
Comment by Harry Tuesday, Jan 8, 13 @ 5:30 am
RE:“Many of the people … that are going to complain about this solution didn’t mind when the General Assembly didn’t make payments” said Cross. “Because at the same time, more money was going to pay raises or a state contract.”
I took this job because of the pension “Mr I hate the middle class” Tom Cross
Comment by foster brooks Tuesday, Jan 8, 13 @ 6:10 am
Well, eventually, the courts will sort it all out, one issue at a time.
That might be a good QOTD: how long will the pension funding continue to be an issue in the GA? Or how long do you think it will take for this issue to be resolved in court? Personally, I don’t think us retirees will live that long …
Comment by RNUG Tuesday, Jan 8, 13 @ 7:48 am
Harry
It looks like there will be no choice in this case. The way the proposed bill reads simply takes away benefits from the retirees and employees. That make you happier?
As for your interpretation of ConCon I guess you are entitled to your confusion but I suspect the ISC will be much less confused. Anyway, we will see if it passes and then see you in court.
Comment by Old and In the Way Tuesday, Jan 8, 13 @ 7:59 am
Harry,
Let me be clear. I don’t like the choices the Cullerton / Madiar are trying to impose on us. I don’t think it is a choice between a existing benefit and a new one; I’m in the group that believe the “20 year” premium free retiree health insurance is an already protected benefit. If something like that were to pass in the next session, I’d most likely refuse to pick one of the options.
Comment by RNUG Tuesday, Jan 8, 13 @ 8:12 am